Many coins are now doing relaunches where they abandon the current contract for whatever reason and then start a new contract and send or airdrop holders of previous contract equivalent amount of new coins. A good example of this is Floki. They launched Floki V1 on ETH, then decided to do a V2 on ETH, and then a V3 on ETH, and now a V4 on ETH which is the current version. There are numerous other coins that do relaunches. I am trying to figure out how to handle the taxes for these scenarios.
For Floki V1 to V2 they asked V1 holders to send tokens to a certain address by a deadline. Everyone that did received equivalent V2 tokens airdropped to them. For V2 to V3 they just pulled LP from V2 at the end date and then gave V2 holders equivalent V3 tokens again via airdrop. The V2 tokens remain but have no value.
I held through both of these relaunches and am trying to figure out how to do the taxes.
End of V1: V1 tokens were sent to a wallet that I cannot access so is that just a sent with nothing in return transaction, so a “loss” equivalent of all cost basis of the V1 coins?
Beginning of V2: V2 coins were airdropped so is that treated as “income” equivalent to the airdropped coins’ value on V2 launch day one? Would this be the beginning of the launch or when I received them that day? This will vary in value wildly as the coin grew rapidly on day one. Or just take the day;s close value.
End of V2: V2 tokens were just left in place in my wallet but have zero value and are not able to be sold. Not sure how to handle this?
Beginning of V3: V3 coins were airdropped so is that treated as “income” equivalent to the airdropped coins’ value on V3 launch day one?
Or could I just treat each relaunch as a trade? V1 was sent and I received V2 at equivalent value so no gain/loss and no income event. Since I still have the V2 coins in my wallet with no value I guess I couldnt treat V2 to V3 as an exchange.
Any thoughts on what to do with this scenario?